SHANGHAI, Mar 20 (SMM) – Processing fees for aluminium billet in China’s southern region Guangdong climbed to nearly three-month highs this week as traders withheld from selling their cargoes to await lower value-added tax rates.
In Guangdong, processing fees for φ90 aluminium billet were offered at over 500 yuan/mt on Monday, the first trading day after Premier Li Keqiang on Friday March 15 announced lower VAT cuts. This was up some 100 yuan/mt from offers of 400 yuan/mt heard on Friday. The aluminium billet processing fees did not retreat on Tuesday and Wednesday.
Aside from the imminent tax cuts, lower prices of spot aluminium in Guangdong than in Shanghai also kept billet traders in the southern market from offloading cargoes.
Recovering consumption also buoyed processing fees for aluminium billet. South China houses many aluminium extrusion plants who use billets as raw materials.
Extrusion plants in the south told SMM that they saw March’s orders significantly improve from February. New orders for aluminium extrusions steadily grew even as demand has yet to reach high-season levels.
While aluminium billet processing fees are likely to pull back after the tax cuts take effect from April 1, SMM remains bullish on aluminium billet processing fees in medium term.
Processing fees for aluminium billet rose in April-May of previous years as consumption improved.